Accounting for Rising Corporate Profits: Intangibles or Regulatory Rents?
51 Pages Posted: 11 May 2016 Last revised: 10 Nov 2016
Date Written: November 9, 2016
Since 1980, US corporate valuations have risen relative to assets and operating margins have grown. The possibility of sustained economic rents has raised concerns about economic dynamism and inequality. But rising profits could come from political rents or, instead, from returns to investments in intangibles. Using new data on Federal regulation and data on lobbying, campaign spending, R&D, and organizational capital, this paper finds that both intangibles and political factors account for a substantial part of the increase in profits, but since 2000 political factors are more important. A difference-in-differences analysis finds that major expansions of regulation increase profits significantly.
Keywords: Regulation, intangibles, economic rents
JEL Classification: D72, L1, E22
Suggested Citation: Suggested Citation